Johannesburg - Over the past week a horrific tale has
unfolded of how around R1.15bn belonging to investors who thought their money
was safe in a money market has apparently been plundered for personal gain by
the directors of various investment companies.
Some of the money (almost R1m) was allegedly even used by
the directors to accompany the Springboks on a rugby tour and covered up in the
books as “management costs”.
The curators of Corporate Money Managers (CMM), the Cash
Managed Fund (CMF) and 10 associated companies are on a fierce offensive to
recover money for the investors in the CMF.
Last week the curators served a summons for R1.1bn on Absa
Group [JSE:ASA] which, as CFM trustee, said the curators, was supposed to have
picked up the malpractices.
But a summons for the same amount was also issued on 21
individuals, 18 of whom were allegedly part of the "reckless, negligent or
deceitful management" of 26 companies through which investors' money in the
CMF was apparently siphoned.
The curators' court documents contend that the individuals
were all involved in managing CMM and allegedly enriched themselves through
misappropriation of the money invested in CMF.
CMM raised money from investors and invested it in the CMF,
which was supposed to be a safe money market investment.
The joint and separate actions of the directors of the bank,
according to the curators, had led to investors in the CMF suffering a R1.15bn
It is this amount that the curators are now attempting to
recover from individuals who, according to one of them, had been involved in
nothing other than fraud which they attempted to cover up.
The money in the CMF was not, as had been intended, invested
in safe money market instruments, but was allegedly used as bridging finance
for dubious property transactions, loans to companies in trouble and for
And when things started to go wrong, the losses were
allegedly concealed by the issue of worthless promissory notes between the
various related companies.
These promissory notes, issued between the related
companies, were also lodged with Absa as proof that the CMF, of which Absa was
the trustee, would be able to meet its obligations to investors.
The promissory notes were however worthless because the
companies had no assets and, according to the curators, the issuers and
signatories were aware of the fact.
In the process of apparently concealing the insolvency of
the related companies, the promissory notes were repeatedly rolled over by
cancelling the originals and replacing them with new ones.
The main protagonists in the alleged plundering of the CMF
include the directors and management of the CMM and Allegro Holdings, a former
subsidiary of the listed company African Dawn.
When CMM was put under curatorship in 2009, Johan Bakkes was
the chief executive and head of investments at CMM and a director of seven of
the related companies and three trusts, with himself and his family as the
Frik Vermaak, who was appointed chief executive of Athletics
South Africa last December, was the chief executive of Allegro Holdings and a
director of Allegro Group Investments, Allegro Bridging, Allegro Property
Services and five of the related companies that were allegedly involved in the
misappropriation of the money invested in the CMF.
CMM and Allegro Holdings were joint shareholders in the
company Miro Holdings, which in turn was the holding company of Miro Capital.
Miro Capital, according to the CMM curators, was one of four
companies established with the special purpose of issuing promissory notes in
favour of the CMM and the CMF so as to get money from the CMF to finance
property deals for four other related companies.
The summons served on the individuals notes that the
indebtedness of the respective related companies to one another - and
ultimately the CMF - amounts to R1.6bn and that 16 of the individuals involved
in managing the companies are jointly and severally responsible for repayment
of the R105.6m to CMM or the CMF.
During the past week Absa announced that it intended
defending itself against the steps being taken by the curators.
An amount of R989 000 that the CMM curators are demanding
from former board members of CMM and related companies, was apparently spent on
a rugby tour to Europe accompanying the Springboks in November 2008.
Two directors of CMM and six board members of Allegro
Bridging, including Bakkes and Vermaak, were on the tour.
An amount of R1.1m was apparently withdrawn from CMM’s bank
account for travelling expenses.
The curators further argue that investors' money was used
for the rugby tour and, by means of creative accounting, was indicated as
amortised debt in the CMM and Allegro books.
In the two companies’ books the money spent on the rugby
tour was reflected as a loan to a related company, Miro Capital (in which CMM
and Allegro were equal shareholders). The payment of R17 000 to each of the
board members on the tour was also noted in this loan account.
Miro Capital “repaid” the loan to CMM by, firstly, on two
occasions crediting the loan account with “repayments by Miro” and then
debiting the amounts in its books as management expenses to CMM.
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